Babas v. Lorenzo Shipping (G.R. No. 186091; December 15, 2010)
CASE DIGEST: EMMANUEL BABAS, DANILO T. BANAG, ARTURO V. VILLARIN, SR., EDWIN JAVIER, SANDI BERMEO, REX ALLESA, MAXIMO SORIANO, JR., ARSENIO ESTORQUE, and FELIXBERTO ANAJAO, Petitioners, v. LORENZO SHIPPING CORPORATION, Respondent. Babas v. Lorenzo Shipping (G.R. No. 186091; December 15, 2010).
FACTS: Lorenzo Shipping Corporation (LSC) is a duly organized domestic corporation engaged in the shipping industry; it owns several equipment necessary for its business. LSC entered into an Agreement with Best Manpower Services, Inc. (BMSI). Under the Agreement, BMSI undertook to provide maintenance and repair services to LSCs container vans, heavy equipment, trailer chassis, and generator sets. BMSI further undertook to provide checkers to inspect all containers received for loading to and/or unloading from its vessels. Simultaneous with the execution of the Agreement, LSC leased its equipment, tools, and tractors to BMSI. The period of lease was coterminous with the Agreement.
BMSI then hired petitioners on various dates to work at LSC as checkers, welders, utility men, clerks, forklift operators, motor pool and machine shop workers, technicians, trailer drivers, and mechanics. Years later, LSC entered into another contract with BMSI, this time, a service contract.
In September 2003, petitioners filed with the Labor Arbiter a complaint for regularization against LSC and BMSI. LSC terminated the Agreement. Consequently, petitioners lost their employment.
LA dismissed the complaint finding that petitioners were employees of BMSI. It was BMSI which hired petitioners, paid their wages, and exercised control over them. On appeal, NLRC reversed the decision. The CA reversed the NLRC ruling holding the BMSI is an independent contractor.
ISSUE: Did the CA erred in ignoring the clear evidence of record that BMSI was engaged in labor-only contracting?
HELD: In distinguishing between prohibited labor-only contracting and permissible job contracting, the totality of the facts and the surrounding circumstances of the case are to be considered.Labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor merely recruits, supplies, or places workers to perform a job, work, or service for a principal. In labor-only contracting, the following elements are present: (a) the contractor or subcontractor does not have substantial capital or investment to actually perform the job, work, or service under its own account and responsibility; and (b) the employees recruited, supplied, or placed by such contractor or subcontractor perform activities which are directly related to the main business of the principal.
On the other hand, permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out with the contractor or subcontractor the performance or completion of a specific job, work, or service within a definite or predetermined period, regardless of whether such job, work, or service is to be performed or completed within or outside the premises of the principal.
The SS sustained the petitioners position that BMSI is engaged labor-only contracting. First, petitioners worked at LSCs premises, and nowhere else. Other than the provisions of the Agreement, there was no showing that it was BMSI which established petitioners working procedure and methods, which supervised petitioners in their work, or which evaluated the same. There was absolute lack of evidence that BMSI exercised control over them or their work, except for the fact that petitioners were hired by BMSI. Second, LSC was unable to present proof that BMSI had substantial capital. The record is bereft of any proof pertaining to the contractors capitalization, nor to its investment in tools, equipment, or implements actually used in the performance or completion of the job, work, or service that it was contracted to render. What is clear was that the equipment used by BMSI were owned by, and merely rented from, LSC. Third, petitioners performed activities which were directly related to the main business of LSC. The work of petitioners as checkers, welders, utility men, drivers, and mechanics could only be characterized as part of, or at least clearly related to, and in the pursuit of, LSCs business. Logically, when petitioners were assigned by BMSI to LSC, BMSI acted merely as a labor-only contractor.
Lastly, as found by the NLRC, BMSI had no other client except for LSC, and neither BMSI nor LSC refuted this finding, thereby bolstering the NLRC finding that BMSI is a labor-only contractor.
In September 2003, petitioners filed with the Labor Arbiter a complaint for regularization against LSC and BMSI. LSC terminated the Agreement. Consequently, petitioners lost their employment.
LA dismissed the complaint finding that petitioners were employees of BMSI. It was BMSI which hired petitioners, paid their wages, and exercised control over them. On appeal, NLRC reversed the decision. The CA reversed the NLRC ruling holding the BMSI is an independent contractor.
ISSUE: Did the CA erred in ignoring the clear evidence of record that BMSI was engaged in labor-only contracting?
HELD: In distinguishing between prohibited labor-only contracting and permissible job contracting, the totality of the facts and the surrounding circumstances of the case are to be considered.Labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor merely recruits, supplies, or places workers to perform a job, work, or service for a principal. In labor-only contracting, the following elements are present: (a) the contractor or subcontractor does not have substantial capital or investment to actually perform the job, work, or service under its own account and responsibility; and (b) the employees recruited, supplied, or placed by such contractor or subcontractor perform activities which are directly related to the main business of the principal.
On the other hand, permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out with the contractor or subcontractor the performance or completion of a specific job, work, or service within a definite or predetermined period, regardless of whether such job, work, or service is to be performed or completed within or outside the premises of the principal.
The SS sustained the petitioners position that BMSI is engaged labor-only contracting. First, petitioners worked at LSCs premises, and nowhere else. Other than the provisions of the Agreement, there was no showing that it was BMSI which established petitioners working procedure and methods, which supervised petitioners in their work, or which evaluated the same. There was absolute lack of evidence that BMSI exercised control over them or their work, except for the fact that petitioners were hired by BMSI. Second, LSC was unable to present proof that BMSI had substantial capital. The record is bereft of any proof pertaining to the contractors capitalization, nor to its investment in tools, equipment, or implements actually used in the performance or completion of the job, work, or service that it was contracted to render. What is clear was that the equipment used by BMSI were owned by, and merely rented from, LSC. Third, petitioners performed activities which were directly related to the main business of LSC. The work of petitioners as checkers, welders, utility men, drivers, and mechanics could only be characterized as part of, or at least clearly related to, and in the pursuit of, LSCs business. Logically, when petitioners were assigned by BMSI to LSC, BMSI acted merely as a labor-only contractor.
Lastly, as found by the NLRC, BMSI had no other client except for LSC, and neither BMSI nor LSC refuted this finding, thereby bolstering the NLRC finding that BMSI is a labor-only contractor.